EIU Global Forecasting Service

The renminbi has recovered but remains vulnerable to slower Chinese growth

January 18th 2018

After coming under heavy pressure in 2016, the renminbi recovered significant ground in the second half of 2017 as the economy performed better than expected. In early January 2018 the People's Bank of China (PBC, the central bank) announced the removal of its so-called counter-cyclical factor, a tool introduced in May 2017 to help it to manage volatility in renminbi trading. The renminbi remains vulnerable to a renewed depreciation, however, owing to continued build-up of liquidity and a gradual slowing in economic growth. Reflecting our updated Chinese growth outlook, we now expect these risks to materialise in 2020-21, when the exchange rate will fall to an annual average of Rmb7.1:US$1.